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Thursday, February 2, 2023

TotalEnergies is a Top Buy on Higher Margin Lubricants

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Cordros Securities reiterated its Buy ratings on TotalEnergies Marketing Nigeria (TEMN) Plc, predicting the company will maintain its resilience in 2023, leveraging its ample storage and distribution network to sustain its sector volume control.

“As evidenced in its preliminary numbers for 2022, we expect the marketer to maintain its strategy of intensifying the output from the higher-margin lubricants space, where it is the current market leader (c. 50.0% of market share),” said the analysts.

Across the investment house coverage, TOTAL maintained its resilience as the marketer sustained profitability growth in the year as the marketer intensified its efforts to improve its sales mix and reduce its reliance on PMS as a significant contributor to revenue.

The marketer has the strongest profit margin among peer rivals, delivering higher returns to shareholders while turning each Naira invested in sales into higher profit.

TOTAL recorded a gross margin of 13.24 percent as at September 2022, and that compares with Ardova, (5.33 percent); MRS, (8.85 percent); Conoil, (11.56 percent), and Eterna, (6.76 percent).

It generated more profit from core operation than peer rivals, which validates its industry leadership as its operating of 6.13 percent is higher than, Conoil, (4.34 percent); Eternal, (2.59 percent ); MRS, (2.41 percent), and Eterna, (-0006).

TOTAL recorded a net profit margin of (3.71 percent); Conoil, (3.25 percent); Ardova, (2.38 percent), and Eterna, (1.56 percent); MRS, (1.14 percent).

Analysts at Cordros Securities put a price target of N435.35 TOTAL and the company’s share price closed at N195 as of December 12,  2022 in Lagos.

The marketer has an attractive valuation that is an entry point for investors. Its dividend yield of 11.50 percent is one of the highest among the NGXASI 30 firms, the most liquid and capitalised entities. It has a price to earnings multiple of 3.50.

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